Zscaler convertibles in focus on strong day for cybersecurity; Wolfspeed up; Sea active

By Abigail W. Adams

Portland, Me., Jan. 17 – The convertibles primary market remained dormant on Tuesday with deal-making expected to remain limited throughout the week as earnings season commences.

While there may not be a rush of activity until late January/early February, the primary market will be an active one with many deals in the works, sources say.

Meanwhile, it was a slow return from the long weekend in the convertibles secondary space with the market largely flat as equity indexes struggled to find direction.

Indexes closed mixed after wavering between gains and losses throughout the session with markets pausing after last week’s strong rally.

The Dow Jones industrial average closed down 392 points, or 1.14%, the S&P 500 index closed down 0.20%, the Nasdaq Composite index closed up 0.14% and the Russell 2000 index closed down 0.17%.

There was $47 million in reported convertibles trading volume about one hour into the session and $432 million on the tape about one hour before the market close with few notable price movements.

Zscaler Inc.’s 0.125% convertible notes due 2025 were in focus on Tuesday with the notes gaining outright on the cusp of president Joe Biden’s approval of a new national cybersecurity strategy.

Wolfspeed Inc.’s 1.875% convertible notes due 2029 continued to trend higher in heavy volume with the notes returning to a 99-handle.

Sea Ltd.’s 0.25% convertible notes due 2026 also continued to inch higher in active trade after a strong uptrend over the past month.

Spotify Technology SA’s 0% exchangeable notes due 2026 also saw some action on Tuesday although with little change to price.

Zscaler in focus

Zscaler’s 0.125% convertible notes due 2025 were in focus on Tuesday with the notes gaining outright as stock surged on the eve of president Biden’s approval of a new national cybersecurity program.

The 0.125% notes were up 2.625 point outright with stock up more than 6%.

They were changing hands at 106 versus a stock price of $113.66 in the late afternoon, according to a market source.

There was $19 million in reported volume with the issue the most actively traded in the secondary space.

Zscaler’s stock traded to a low of $104.34 and a high of $115.01 before closing the day at $113.51, an increase of 5.79%.

Tuesday marked a strong day for cybersecurity stocks with president Biden’s approval of a new cybersecurity strategy expected shortly.

The policy will include mandatory cybersecurity regulations for a wide variety of industries, Homeland Security Today reported.

Wolfspeed rises

Wolfspeed’s 1.875% convertible notes due 2029 continued to trend higher on Tuesday with the notes reclaiming a 99-handle.

The 1.875% notes climbed 1.5 points outright with stock up less than 1% on Tuesday.

The notes were seen at 99.35 versus a stock price of $80.22 in the late afternoon.

There was $15 million in reported volume.

Wolfspeed’s stock traded to a low of $79.11 and a high of $81.37 before closing the day at $80.92, an increase of 1.31%.

The 1.875% notes have been on a strong uptrend over the past month after bottoming out at 90 in the final trading days of 2022.

Sea active

Sea’s 0.25% convertible notes due 2026 continued to inch higher after a strong uptrend over the past month.

The 0.25% notes rose another 0.375 point outright to break above a 77-handle.

The notes were wrapped around 78 in the late afternoon with the yield 7.2%, according to a market source.

There was $14 million in reported volume.

While not equity sensitive with a conversion premium of over 650%, Sea’s American Depositary Shares closed Tuesday at $62.19, an increase of 3.44%.

Spotify’s morning

Spotify’s 0% exchangeable notes due 2026 were active early in Tuesday’s session although activity in the name diminished as the session progressed.

The 0% notes were trading at 83 versus a stock price of $91.14 early in the day, according to a market source.

The yield was about 6%.

There was $6 million in reported volume.

Spotify’s stock traded to a high of $92.73 and a low of $90.59 before closing the day at $91.75, a decrease of 0.34%.

Mentioned in this article:

Sea Ltd. NYSE: SE

Spotify Technology SA NYSE: SPOT

Wolfspeed Inc. NYSE: WOLF

Zscaler Inc. Nasdaq: ZS

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